During the holidays, it’s a time of giving—and sometimes sorting. For example, this past week, I sorted my closet and gave away 10 bags of clothing, purses, belts, scarves and shoes. I did a quick reckoning and calculated that the original value of those items was a cool $1000. Many of those giveaways were once gifts from friends and family. I couldn’t help but think, “What if I was gifted with money in a savings account or an investment fund instead?” The answer is: “You’d be a lot better off and your investment would have earned money instead of ending up in a giveaway bin.”

This year, why not take $500 and open an investment account for someone you love? Give the gift of investing by getting a loved one a start in this key area of financial responsibility. Recently on The Money Millhouse, we hosted Brenna Casserly. Brenna Casserly is CEO and Co-Founder of Emperor Investments, a Toronto-based robo-advisor.

She helped us understand a lot about Emperor and how they work as well as other investment terms such as an ETF. Brenna said, “Think of an ETF like a black box. When you open the box you notice that it is filled with some really great companies and others not so good. When you buy an ETF, you buy the entire black box and unfortunately cannot just pick out the companies you wish to own.”

One of the reasons we like Emperor Investments is that Emperor was founded on the notion that investing is highly personal. Over the course of the last decade, Brenna and co-founder, Francis Tapon, have developed proprietary technology that builds personalized portfolios. This means you don’t have to know everything there is to know about investing, you’ll have a partner at Emperor who will help you decide which fund is best for your investment style and your financial needs.

For a limited time, you can open an account at Emperor and our non-profit, Heroes at Home, will benefit from your new account if you use this link to Emperor Investments for the Money Millhouse. We believe in this kind of investing so much that we gifted an account to others who need help in just getting started.

So instead of giving your friend or family member gifts that will end up in the giveaway bin in just a few years, give them an investment account that will be worth more than your original investment in a few years. The gift that will keep on giving.

Don’t forget to use our Money Millhouse link in order to benefit Heroes at Home, so that we can continue to provide free financial education to our military members around the world.

The Kay Family had five babies in seven years. That roughly adds up to 3 kids in diapers at once, 10 years of not sleeping through the night, 4 teenage drivers at the same time, 3 kids in college at once and today, we have 5 millennials in their 20’s simultaneously.

Fun .

But the good news is that they eventually slept, pottied, drove, graduated and even mastered money habits in the journey. Here are the habits we helped teach our millennials to make sure they didn’t have to move home, they could remain financially independent, have a great start for their families, and still buy their mama nice birthday gifts.

Habit #1 – Create and Live By a Spending Plan

Many millennials have heard of the value of creating a budget and even have apps that help. But it’s of little use if they don’t know how to stick to it. Here are my favorite apps to help:

Mint Budgeting App – I met the founder of Mint, Aaron Patzer, in a green room, years ago, when we were both going to be on ABC News in NYC. At the time, he was building his success with Mint. I just remember him being (as he says in the video) “full of myself.” Ha! But his budgeting app is probably the best out there because it makes it easy to create a budget. You connect the Mint app to your bank and the app uses your details to help create a personalized budget.

PocketGuard Budget App – This app also connects to your bank accounts and shows you what you currently have in your pocket. It tracks your money to show what you are spending and automates where you’re going off budget and where you need to cut back.

You Need a Budget – This app’s claim to fame is that it creates a budget you can stick to based on the info provided in your bank accounts and spending habits. It even teaches you what to do if you overspend and how to live on last month’s income. This is the only app that cost money in my list and it’s $50 for the year, but there are hoards of devotees that say this app helped them to finally live on a budget.

GoodBudget – Back when dinosaurs roamed the financial space, there was an “envelope system” where you put the money you needed in each envelope labeled with expenses such as gas, food and entertainment. It helped Bob and I get out of 40K in consumer debt in only 2.5 years when we were first married. This app is the digital version of that system, making sure that everyone knows how much is left in the “envelope.”

Money evaporates when you order out for lunch or dinner more than one or two meals a week. Bob took leftover dinners (the

re’s a microwave and fridge at work) for our entire marriage and we calculate that he’s saved $20,000 by doing this! Make Pintrist your pal or watch The Food Network to learn easy ways to create nutritious and tasty meals. Ask for an Instant Pot for your next birthday and make more than you need for dinner so you’ll have leftovers for either lunch or dinner later in the week. Or freeze the leftovers. My daughter lived with roommates for a few years and they would assign different nights for each of them to cook to simplify the work. Cook more and your wallet and your waistline will thank you.

Habit #3 – Care About Your Retirement

When we take our Heroes At Home Financial Event on the road, we teach young service members the miracle of compounding interest with the mantra: start early, start small and stay committed. Be sure to start with funding a Roth IRA and take advantage of your company’s matching portion of your 401(k). Lacey Langford, an Accredited Financial Counselor gave some great tips on a segment called “I Aint Afraid of No Money.” She discussed retirement planning from her experience in working with the military (but many tips apply to civilians as well.) If you’re military, be sure to go into your Family Readiness Center to discuss the Blended Retirement System and what your options are for your situation. It’s free and a benefit you can use early and often.

Habit #4 – Count the Cost of Debt

The average millennial college grad owes 37K in student loan debt and the average household owes $8500 in credit card debt. Work on minimizing the debt you accrue and pay off the debt you have so that you’ll have the flexibility to move or wait on the right job. One of my sons worked for JC Penney, and they eliminated his entire department. Most employees were freaking out because they had student loan debt, consumer debt and car debt—but not our son. He made a practice of living on less so he wouldn’t accrue debt and he was able to have less worry in the process of finding a new job.

Be sure you also pay attention to your credit score. Rod Griffin, from Experian, came over for a discussion on coffee and credit. He works with us on our tours and he teaches that if you have bad credit, you’ll pay an average of 360K more (over your lifetime) for the use of basic credit, than the person who has a good score. Improve your score by paying on time, paying more than the minimum balance due and make sure you never use more than 30% of your available credit.

Habit #5 – Choose Contentment

This is a tricky habit because it’s a mindset that you choose. There will always be something to spend money on to make you go off budget or get into financial trouble. There’s the new phone, tablet, car, vacay, boyfriend/girlfriend, baby, or a plethora of other reasons to want to spend more and have more. This is where your friends, family and even faith come into play. Coveting what others have or do is a lesson in futility and discontentment. Your friends either contribute to this mindset or they keep you focused on what matters most. If keeping up with their lifestyle is an important platform in your friendship, then you may want to find new friends. Remember that this financial journey is a marathon not a sprint. I’ve always said, “you can have it all—just not at the same time.”

What is one habit you are good at? What is one habit you want to improve upon? Share it with us, a friend or even a money buddy, so that you can be fiscally healthy in 2018 and for a lifetime.

It’s good news that housing is on the rebound and you can improve your home’s value even more! Luckily for you, you don’t have to put thousands of dollars into remodeling to boost your home back up to the value it was in 2007. Whether you are looking to sell now or well into the future, there are a few things you can do that can easily improve the value of your home.

1. Slapping on Paint: This is the number one home-improvement project homeowners will try themselves. There are two keys to a good paint job: choosing the paint and prepping the surfaces. Splurge on quality paint, as well as brushes and rollers. If you’re not sure of the color you want, rent a sample (yes, most full-service hardware stores will let you do this). Prep the surface by cleaning the walls, sanding them, and patching holes. This accounts for the majority of the work and will make your house show better (improving its value).

2. Finish the Basement: A family can add as much as a third more space to a two-story house for a moderate cost (only a fraction of what it would cost to build a third onto a home) and recoup as much as 80 percent of the investment upon selling. Determine the basement’s condition, including waterproofing, a sump pump, and making sure there is adequate heating and cooling that doesn’t drain the other units.

3. Lose the Kitchen Wall: Many older homes have a wall that separates the dining room and kitchen. By knocking down that wall, the space is opened up and voila! A new look that can allow you to recover 70 to 80 percent of the cost of the renovation. The rest of the kitchen may need to be updated with wood cabinets, non-laminate countertops, and non-vinyl flooring.

4. Try a Little Bathroom Remodel: Keep up with today’s amenities by updating your bathroom with double sinks, brushed nickel fixtures, powerful multi-head showers, and toilets in their own alcoves. Rather than spending $30,000 on a complete overhaul, you could purchase a new toilet, sink, and fixtures for a fraction of the cost.

5. Window Treatments: When we purchased our current home, one of the main features the real estate broker, the seller, and the neighbors kept talking about were the windows. They were double-paned Pella windows, which was as nice an accessory to a home as Prada handbag is to a fashion maven. According to Remodeling magazine, this investment could be as much as a 75-percent recoup upon selling.

6. Do the Little Things: While living in your home, there are projects along the way that will add value. First, have your carpets cleaned annually to improve the chances that the next homeowner will be able to live with them. In between cleanings, vacuum regularly and clean up any spills with a stain-remover. Another small step is taking care of your yard. Obviously, manicured grass, living plants and a groomed landscape make a home look better, raising its value. My husband was constantly enlisting the help of our sons to keep both our front and back yards clean and beautiful, and we get to enjoy them well before we sell our home.

When all households are included— not just households with retirement accounts—the median retirement account balance is $3,000 for all working-age households and $12,000 for near-retirement households.

Two-thirds of working households age 55-64 with at least one earner have retirement savings less than one times their annual income, which is far below what they will need to maintain their standard of living in retirement.

There are a few things you can do to recession proof your retirement. I have been working with the Indexed Annuity Leadership Council, a not for profit group that helps educate consumers. I’ve been working as a spokesperson to help consumers plan for retirement. For my full blog on recession proof retirement, click here and enjoy!

I’ve been on television and radio, as well as in live conferences lately giving my mid-year investment update. Due to so many requests, I’m posting the update today. Just remember that there’s no such thing as a safe investment and that any investment advice is something that must be evaluated by individuals as to what will work best for them personally.

Also, remember that before you invest in the stock market, an ETF or buy Gold as an investment, make sure that you’ve paid off all consumer debt, have funded your 401(k), built up a basic savings account with six months of income and funded an IRA.

What we know is true:

The bloom has falloff the rose in Europe. The market seems to be pricing in a 50% chance of a “bad outcome” –thus the current market pricing.

The end of disparities has seemingly brought US eco numbers down to earth. (Still not terrible).

US corporate balance sheets are at a 50-year high.

US equity valuation multiples are at a multi-decade low.

US GDP now estimated @ 2%. GDP is simply NOT in recovery mode yet.

Although things appear bad, keep in mind two things: First, a lot of terrible news has already been digested in the market (and the market has adjusted to receive that news). Two, setting yourself up for Armageddon has, thus far, never worked out very well.

Housing Market: The sheer fact that median rental yields are more than 1.5% higher than the average 30-year fixed rate mortgage should help support property prices. This suggest more residential property investment is becoming cash flow positive meaning there is scope for rents to cover interest and principal. I would recommend the SPDR Homebuilders ETX (XHB) for passive exposure to the US housing recovery.

Gold: My friend, Larry Shover, author of Trading Options in Turbulent Markets (Bloomberg Financial) says: “Gold is the end driver of global liquidity” and he is right. Industry consolidation and supply potential in western China provides a lot of expansion opportunities. In addition, bear in mind that China’s jewelry consumption per capita is less than 10% of the US. Everyone should have some exposure to it. I recommend the ETF (GLD).

I was on Fox News – Your World with Neil Cavuto — this week discussing the fact that gold hit $1600 an ounce. I want to give a big shout out to Larry Shover, the author of Trading Options in Turbulent Markets who (literally) wrote the book on how to invest during economic turmoil.

First of all, remember that “safe investing” is an oxymoron. When you invest seriously (for more than 1% on a bank CD), then you are going to face some kind of risk. But there are some areas to invest that present less risk than others. So with that disclaimer, let’s look at where to put your money in a turbulent economy.

1. Stock Market (S/P 500 stocks): It’s important to acknowledge that there have been and will likely be strong corporate profits. The stock market is very attractively priced – especially given the good profits and strong balance sheets of the top-tier US stocks. Could the stock market go lower? Of course, yet the “cheapness” in the stock market is a reflection of: Sovereign debt, US issues, concern of slowdown in emerging economies. It would appear a lot of this negative stuff is already priced into the market. Any top-tier (dividend paying) issue is a good long-term bet.

2. CTA: Invest in a “Commodities Trading Advisor” most of which take advantage of the various/sundry trends in the market whether they be up or down. CTA’s tend to perform very,very well in economic uncertainty – especially in very toxic markets like 2008. Every portfolio should take advantage of a CTA fund that captures trends in: FX, oil, grains, indexes, bonds, et al. Warning: CTA’s can be very volatile yet, history has proven that even with the volatility they tend to be less risky.

3. Gold: According to my friend, Larry Shover, “Gold is the Casual driver of global liquidity” and,I agree. If you believe that money is to remain cheap than gold makes sense. However, if you feel there will be a spike in inflation or reverse monetary policies I wouldn’t own gold with a ten foot pole. Also, golds most recent run-up to 1600 has had more to do with contagion fear than fundamentals. I wouldn’t be suprised to see it back at around 1550 in the near-term.

4. Asian Tiger Exposure: Invest in either a mutual fund or ETF that has genuine exposure to the asian tigers (Hong Kong, Singapore, South Korea, Taiwan). These are countries that are booming – without all the fetters of taxation and regulation. In fact, most of them have been described as replicating the US back in the early 20th century! Cheaper labor, low taxation, growing middle class = success!

Christmas is one of my most favorite times of the year and this year, more people are getting into the idea of gifting than last year. In fact, according to a recent survey, 73% of consumers say that they will spend the same as last year during the fourth quarter, and 18% of consumers report that they will spend more. So spending is back up again, but I think that strategic spending is more important now than ever.It’s important for consumers to be careful and thoughtful in the decisions they make when it comes to buying gifts this holiday. That’s why I’ve partnered with Upromise to tell my friends about the gift of education. So while parents and grandparents (even favorite aunties) are splurging on kids, why not work on saving for kids, too by providing for that cute kid’s college education?

You can open a 529 account for any beneficiary, or gift money using Ugift into an Upromise Investments 529 plan. If you don’t already have a 529 plan, then you are really missing out because the contributions can benefit from tax deferred growth. Also, gifting into one of these plans this time of year also means that you can possibly take advantage of year end tax deductions. Just check to see if you are eligible for states income tax deductions or credits for saving for college. For example, parents and grandparents can contribute as much as $13,000 ($26,000 if married filing jointly) into a 529 plan without incurring gift taxes. A special rule allows married couples to gift up to $130,000 ($65,000 if single) as long as no additional gifts are made to that beneficiary over a five year period. This also applies to recent college grads who might appreciate a meaningful gift to help pay a student loan payment. Plus, you don’t have to be a parent or grandparent to participate, other friends and family can make contributions to your child’s 529 plan by gifting money or by buying gifts, which brings me to my next point—how to save money by spending money.

Most people, know about Upromise from signing up for their buying program. I’ve been participating for years by going to Upromise.com and then purchasing through participating online retailers. These are stores where I would shop anyway and I get anywhere from 1% to 25% back for the purchases I make. And our family isn’t the only one doing this. Last year, during the holiday season Upromise members received $12 million in college savings rewards from eligible holiday spending. Because membership is free and members have collectively earned $575 million in college savings from purchasing items online or even by buying gas or groceries. I book a lot of travel for my business and often find myself eating out—all these are also included toward my children’s 529 plans.

So consider giving the gift of education to a child you love—either by saving or spending, and the world will be a much smarter place!

Here’s a “Hero Shot” of hubby Bob and his F-4 Phantom, that he flew up until last year when a jet incident caused him to break his back. Thankfully, he is fully functional, but his injuries will not allow him to fly an ejection seat aircraft. The good news: he’s gainfully employed flying “regular” airplanes and also the Global Hawk UAV (think the high tech airplane on Transformers).

We had a lot of questions when he had that accident and I speak with a lot of military members and their families who have questions about their lives and finances as well. Some of these fine people were on ABC News with me recently for a Q&A. Here’s the recap for you to share with others you know who are in our armed forces. The questions that made it on ABC NEWS won a free copy of their choice of my books! But here are the answers to many more questions.

Q. Is SGLI enough insurance for families or do you need an additional supplemental insurance?From Melody O’Sullivan

ELLIE:SGLI is relatively cheap, term group life insurance that is offered to members of the military on active duty, in the ready reservists, members of the National Guard, members of the Commissioned Corps of the National Oceanic and Atmospheric Administration and the Public Health Service, cadets and midshipmen of the four service academies, and members of the Reserve Officer Training Corps. The insurance is also offered to spouses as well.Servicemembers’ Group Life Insurance coverage is available in $50,000 increments up to the maximum of $400,000 for members of the military. The price for this insurance is very cheap, so it’s certainly a good value. But is it enough? If you are a young family with only one or two children, then it could be enough. But if you are a more senior servicemember with a lot of family members depending on you, then you might want to buy some term supplemental insurance. Remember that once you leave the military, SGLI is no longer available to you. So if you know you are going to separate in the next couple of years, then it would be a good idea to get a modest supplemental life insurance policy in place.

Q. As a “Key Spouse” how do we encourage other spouses to take advantage of all the benefits the military has to offer? From Starr Vuchetich

ELLIE: Thank you, Starr, for your volunteer work with other spouses, you are to be commended as should ALL our Key Spouses! There’s an old saying that “you can lead a horse to water, but you can’t make it drink.” Your job, as a key spouse, is a difficult one. You know the benefit of taking advantage of the services and perks available to military families, but others have to decide for themselves. The best thing you can do is to lead those spouses by example and express the benefits you are personally receiving from taking advantage of, such as free childcare for volunteering, free financial counseling, free oil changes (or whatever program your base offers), as well as the many benefits listed at sites such as www.militaryonesource.com or www.ourmilitary.mil

Q. How did you arrange childcare during deployments with very little money and how did you maintain sanity with so many small children on a tight budget? From Jana Baez

ELLIE: I do remember what an incredible challenge it was when all my kids were so young and my husband was gone for weeks (or months) on end. But the first thing I did was plug into all the “free babysitting” I could get. Go to the Family Support Center and see if they offer free childcare for those who volunteer. I also got on site childcare provided when I attended Army Family Team Building classes, so sometimes you can get a break and learn something, too. Don’t forget the community outside of the base gates, either. There are a number of churches, community centers and MOPS (Mothers of Preschoolers) groups that try to support military families during deployments by offering free “Mother’s Day Out” programs or onsite classes where childcare is provided. Last, but not least, form a babysitting co-op, where you get tickets for every child you babysit for every hour. You can “redeem” your tickets with other co-op members and it serves as a way to escape for a while as well as a playgroup when you are watching other children.

Q. How does one begin a business without acquiring debt? From Chana Montgomery

ELLIE: In the case of a military family, you need to start a business that is completely portable and can move with you. It’s important to select a homebased business that requires little initial investment and will still yield an income to keep you in the black. Do your research and talk to a mentor at SCORE.org where you can get free business counseling in your desired field. If you follow your passion, you’ll be far more likely to succeed. Just email assistant@elliekay.com and ask for the “Homemade Business” file, we’ll send it to you for free as it contains all the information you need to be successful in your endeavor.

Q. When you have extra income flowing in, is it better to work on paying off debts or continue paying normal payments and stash the money into savings? From Emily Haffner

ELLIE: The answer is “both” if you pay even $5 to $10 more on your credit card minimums, you’ll improve your FICO score and begin to pay down that debt. But you also need a safety net in savings just in case your car breaks down and your husband is downrange and not home to fix it. The optimum savings goal is to have 12 months worth of living expenses. But even if you just save up to 3 months (and keep adding to it little by little) you’ll be better prepared for rainy days.

Q. I have three children and I wanted to know if I should apply the new 9-11 GI Bill to the first child (not knowing how long it will be around) or should I split it up among the children. Stephanie Berg

ELLIE: Because the Post 911 GI bill is relatively new, and because we don’t know how Congress will vote to continue this practice, it may be best to take the money while you can. It’s still important to have your child go to the most affordable school possible, get scholarships and other means of payment. But go ahead and use as much of that GI Bill money as you can to pay what you can on your oldest child’s college. In the meantime, the money you would have put toward his/her college (from your own 529 plan or other savings vehicle) put into another college fund for your other two children.

By funding more on the other two children’s accounts, your money will continue to grow as the market continues to rebound. But in the meantime, you will also be able to take advantage of the current bill. Do not give your first child his/her saved “college money.” Instead, put whatever you have saved toward the other two. You can tell your oldest that his/her college money is coming in the form of the POST 9ll GI bill. Because you don’t want the youngest two to be stuck with student loan debt that the oldest child did not have to accrue.

Q. With limited funds, what should be the priorities for the best use of financial planning? Should I invest in the TSP (Thrift Savings Plan), IRA, life insurance or mutual funds? Major Anthony Smith

ELLIE: Once you’ve paid off your credit cards and funded a 12 month savings account, then you are ready to take your investments to the next level. It will depend on your family size, retirement needs and current income. I do not recommend life insurance as a good investment tool, even though agents may point you toward that route since the commissions are significant. Better to max out your TSP benefit since those funds will still be available to you if you do not make the military your career for a twenty year retirement requirement. It’s also a good idea to get a ROTH IRA or regular IRA. Go to your Airman and Family Readiness center and ask for an appointment with a financial counselor. It’s free advice and the expert there can look at your entire financial picture to help you come up with the best method of investing. Or try the military friendly company, USAA, they help to fund a lot of military events and can offer good advice on mutual funds.

Q. Being that you moved many times during your military career and have many children, how did you present it to the children when you had to PCS (Permanent Change of Station)? From Kristie Fromer

ELLIE: This is the hard part of military life, Kristie, and thank you for your willingness to go through this. One of the advantages of having so many kids is that they were sure to have built in playmates wherever they went! When we told our kids they would have to leave their friends, we allowed them the freedom to grieve and be sad over leaving. But we were also positive about where we were going. We printed out materials about the new base and all the places we could visit and where we would go camping along the way. By focusing on the positive, while allowing them the freedom to express their feelings, we had healthy, adjusted kids and a well bonded family.

Q. If your auto is less than two years old, is it a good time to refinance? We retire in 2011 and will be buying a house wherever my husband starts his second career. Is this wise to do before buying a house? From Lisa McClain

ELLIE: Refinancing a car will cause a hit to your FICO score, but it can be a good idea in order to get you a lower interest rate. I offer two words of caution: 1) refi at least six months before you get a home loan in order to give your credit time to recover and 2) refi with payments that will end at the same time your original loan would have ended (otherwise, you’re just paying interest over a longer period of time.) For example, if you have 3 years left on your car loan. Then refi the loan for 3 years (instead of 4 or 5).

Thank you for your service, military members and your families. Remember three things:

Ellie was on ABC News and KLOVE discussing the attack facing 401(k) accounts.

The 401(k), which has long been known as the ticket to retirement for millions of Americans is under attack from within and has taken a hit in recent years. In the second quarter of this year, a record 2.2% of participants in 401(k) plans took hardship withdrawals from their savings, which is up 2% from the same figures available a year ago. What is the long term impact of raiding your 401(k)?

Q. The news about early withdrawals on 401(k) plans is worrisome and yet thousands of participants are making these decisions in increasing numbers. Why do you think people are taking the early withdrawal?

ELLIE: I think that it is worrisome when you are borrowing on tomorrow’s retirement to handle today’s financial issues. But I think that the vast majority of those who are taking this money out are doing it to pay their bills. Some have had their hours cut or maybe a spouse has lost their jobs. Others have seen their kids college fund shrink to where they cannot afford to pay tuition for this year and they’re raiding their 401(k)s to pay that hefty bill. It’s just a sign of the hard economic times in which we are living. Our parents’ generation tended to work for someone who gave them a pension check for the rest of their lives. This means that current workers may not have been raised with the mindset that they control their own pensions and need to make funding their own retirements a priority. There’s an alarming trend that involves looking at 401(k) accounts as “now” money when it’s really “later” money, that really must be saved for later.

Q. Aren’t there certain stipulations associated with a 401(k) hardship withdrawal? How easy is it to get?

ELLIE: I think that the increased percentage of those who qualify for an early withdrawal indicate the financial strain that many families are facing because this kind of withdrawal is not easy to get. Under IRS guidelines, 401(k) administrators can grant hardship withdrawals only for specific reasons, including tuition payments, the purchase of a primary residence, unreimbursed medical bills and prevention of foreclosure.

Q. The IRS has guidelines for hardship withdrawals, can companies also impose additional limits on their employees?

ELLIE: Yes, and in most cases the company rules are even tougher than the IRS. So if that number of Americans managed to actually secure a 401(k) hardship withdrawal, then it is a huge indicator of how the financial difficulty that many Americans are currently experiencing in our present economy.

Q. Of all the reasons you mentioned for taking a withdrawal, what is the number one reason that participants are raiding their 401(k)?

ELLIE: The number one reason is to pay the mortgage in the face of a foreclosure. In the second quarter, nearly 10% of households with a mortgage were at least one payment behind on their loans, this is according to the Mortgage Bankers Association report that came out last week. Families who feel they may lose their homes often believe they have no choice but to tap their retirement savings. But many of those families have not yet exhausted all their resources. If it’s a short term problem, then talk with your mortgage lenders and see if they will suspend or lower your payments over the next three to six months until you are back on your feet again. They can also go to MakingHomeAffordable.gov, which is a federal government website with the goal of helping families by providing free HUD-approved counselors who can help you modify your mortgage. These are far better options than raiding your retirement fund.

Q. What about those families who are tapping into their 401(k) to pay tuition, you say this is a very bad money move, why?

ELLIE: As a mom with three kids who have graduated from college, two kids in college and two more headed toward college, I believe I can speak to the importance of getting that college degree. That having been said, I still think that those families who pay for tuition with their retirement dollars have their priorities wrong. There are other ways to pay for college, including taking a year off and working, going to a junior college for a couple of years, getting funds through an internship or work/study program or even getting a loan. You can get a loan to fund college but you can’t get a loan to fund your retirement. I never think it’s wise to borrow on your own future to pay for your child’s short term goal.

Q. What are some of the taxes and other penalties that arise when you take a hardship withdrawal?

ELLIE: These taxes and penalties are the main reason I say that it’s not a good idea to raid your 401(k) and one of the primary reasons is that, depending on your tax bracket, you could end up giving a third or more of your money to the IRS. You’ll have to pay income taxes on the entire amount of your withdrawal, at your ordinary income rate. And if you’re under 591/2, you’ll also have to pay a 10% early withdrawal penalty. Since the average age of those who took the hardship withdrawal in the second quarter was between the ages of 35 and 55, this tells us that most workers who took the cash are paying the penalty!

Q. You also say that there is an intrinsic “opportunity cost” that arises at the time of withdrawal, what is this cost?

ELLIE: When you take a hardship withdrawal, you’re prohibited from contributing to your 401(K) PLAN FOR SIX MONTHS! That means you’ll miss out on any investment gains you could hae earned by contributing during that period. You’ll also miss out on the company match, which is a guaranteed return on your investment and depending on the match, it’s usually much more than what you can earn in the market if you made your own investment. For example, if your company matches 50% of what you put into the account, you just won’t find another investment out there where you would get a 50% return on the money you put into that investment. So there’s a double jeopardy penalty associated with early withdrawal. You’ll pay for it now and you’ll pay for it later—then at retirement, you’ll pay for it all over again because you won’t have that money in the account.

Q. What about the fact that you can deplete an asset that is off limit to creditors, how does this impact a participant?

ELLIE: While raiding an account to avoid bankruptcy or foreclosure is a well intentioned money move, it’s also foolish because if you end up in bankruptcy anyway, then you’ve passed up the benefit you have in the fact that most retirement accounts are protected under bankruptcy laws in most states. And when it comes to 401(k) accounts specifically, it’s important to know that when filing for bankruptcy protection, creditors will go after your assets to repay your debts but federal law protects your 401(k) from creditors.

I was recently on ABC News, Good Money Show, talking about whether you should buy a hybrid, that extended warranty or a programmable thermostat–are they really worth it?

Consumers in a post recession economy are constantly looking for ways to save money. In some cases, there’s an upfront investment required in order to save more in the long run. Should you ante up now on the promise that the investment will pay off later? Today, I’m going to answer your questions about when to invest now in order to save later and when you should pass or just say “no.”

Q. When consumers consider purchasing a product that carries a good faith promise of “invest a little money now and save big money down the road” how can you tell which investments are worth the cash and which are scams?

ELLIE: Whenever there is a post recession economy, there is also going to be a proliferation of those unscrupulous individuals who will try to take advantage of a consumer who is out to save money and cut expenses. There is a difference between fraud, which is illegal and punishable by law and the empty promise, which a salesman might make to close the deal. Before you sign the dotted line with a solar panel sales company, check them out on the Better Business Bureau site. But just because there are no complaints doesn’t mean it’s a legitimate business. Ask for references, don’t give into pressure sales, never respond to an email inquiry, and guard your personal information.

Q. Let’s go down the list of common purchases that promise to save us money in the long run if we invest a little money now. Let’s start with a simple programmable thermostat that costs around $50. Is it worth it?

ELLIE: The average family spends $2700 a year on home energy and nearly half of that goes to heat or cool their home. A programmable thermostat is easy to install and should save you around $180 a year, so you’ll recover that investment in about four months. This is a “must have” purchase for every home.

Q. What about a hybrid car? The promise is that we will save enough on gas to recoup the extra cost of purchasing the car. How much more do these cars costs and do you think that it’s worth the additional expense?

ELLIE: If you buy a hybrid, you’ll pay 20 to 30% more than a nonhybrid counterpart. The answer to this question is Yes and No. Yes, if you buy a less expensive hybrid like a Toyota Prius (which starts at $22,000) and if you put 20K+ miles on your car every year. You’d also need to do mostly city driving for this to be worth it. No, it wouldn’t be worth it if you buy a more expensive hybrid, don’t put as many miles on it or if gas prices are under $4 a gallon.

Q. I use my laptop computer a lot and I’ve always bought an extended warranty on it because I want to make sure I can save on repairs. I spent about $100 for my laptop warranty for a two year extended warranty. Did I do the right thing?

ELLIE: If you have an expensive laptop ($1000 or more), then you did the right thing because laptops cost more to service than desktop computers. But if you bought a $400 desktop, chances are you can fix a lot of those problems yourself—they are very user friendly. So in the case of an inexpensive desktop, it would probably be best to just pass on buying an extended warranty.

Q. This past week the Mortgage Bankers Association released mixed mortgage rates. An average 30 year mortgage increased to 4.82% and the average 15 year mortgage rate was 4.23%. A big question on homeowner’s minds is: should I pursue a mortgage refinance? Ellie, when the average refi costs anywhere from 2% to 3% of the total loan, when is it a good idea to refinance?

ELLIE: There’s a good rule of thumb when it comes to refinancing your home. If you can get at least a full one percent break from the interest rate you’re now paying and if you do not plan to move for the next 3 to 5 years, then there probably won’t be a better time to refinance. Just make sure that you crunch the numbers, using my mortgage refi tool at elliekay.com and be sure you shop around with different lenders such as INGDirect.com, wellsfargo.com, and bankrate.com. Get a GFE (Good faith estimate) up front and don’t let them add the closing costs to the back end of your loan because you would be paying interest on your closing costs and that negates a good portion of the value of the refi.

Q. Summer is here and I’ve always heard that planting your own garden can not only yield great tasting fresh produce, but you can also save a lot of money. There’s also CSA (community sponsored agriculture) programs that allow members to purchase shares and get weekly produce from specific farms. Are these a good idea?

ELLIE: You’re going to pay around $70 to plant your own garden and it will cost around $450 to purchase a 12 to 15 week CSA share So the answer is “yes” this will save you money if you want to invest 5 hours a week on your own garden. If you go the CSA route, the breakeven point is spending more than $33 a week on produce. One other option is to split your efforts with a friend or neighbor. You can share a local garden or you can each go in on a CSA share (paying $225 each instead of the $450 for the full share). Plus, you’ll get some healthy and super fresh results!

Q. We’re hearing a lot about energy star appliances such as refrigerators and washing machines. They promise to save us 40% on energy and water bills but sometimes cost 70% more than non-Energy Star certified. Is it worth it to replace your existing appliance?

ELLIE: If you have to replace that appliance anyway and you shop around, then yes it can be a great example of spend now and save later. Let’s take the example of a washing machine. You have an older top loading model that costs around $44/ year in energy. An Energy Star rated front loader (such as the Frigidaire Affinity, 3.5 cubic foot model) costs only $18 per year in energy (gas or electricity). But, it also saves 40% on water, you use less detergent, the clothes come out less damp, which means less time in the dryer. All these additional savings, including the savings of around 7,000 gallons for an average sized family means that this is a good purchase. Plus, if you go to www.energysavers.gov , you’ll find a list of appliance rebates and tax credits that are available for Energy Star rated appliances in your state!

Q. What about credit card balance transfers. There are still a lot of offers out there that promise to save consumers money with a lower interest rate. It can cost up to 5% of your credit card balance. Every financial expert has an opinion on this. What’s yours?

ELLIE: I’m not a big fan of credit card balance transfers and it’s not just because of the transfer fee. I’ve seen too many “hoppers” who transfer balances frequently, chasing the lower interest rates when the existing introductory rate expires. I have an online calculator at elliekay.com that can help you determine how much money you would save in a balance transfer. A lot of these offers are for consumers that open a new card and when you’re opening multiple new cards and closing others down, just to chase a lower interest rate, you risk deteriorating your FICO, or credit score. So unless you’re going from an 18+% rate down to a fixed 5% rate (plus the transfer fee) and chances are not good you’re going to find that kind of good deal—then just pass.